The dollar's weakness brought relief to other currencies, with the euro holding at $1.1076, hovering near a five-month high, and on track to rise more than 3% this year.
Euro-dollar 2024 Forecast
Monetary policy in 2024 is likely to have currency implications and be the main focus. Bold monetary policy decisions made in 2023 will likely be reversed the following year when central banks begin cutting interest rates. There is a possibility that if inflation continues to rise, central banks may decide to keep interest rates higher for longer than expected.
According to the latest EUR/USD forecast for 2024, if there is to be a rally in EUR/USD, it should be driven by the dollar leg. Beyond the Fed's quantitative easing story, there is also the risk of US financial deterioration and reduced dependence on the US dollar – both perhaps slow-burning stories. There is also the small matter of the US elections.
Headwinds to the EUR/USD rally stem largely from weak growth in the Eurozone and the risk that the European Central Bank opts to cut interest rates alongside the Fed. This would limit the expected narrowing of yield spreads at the short end of the curve.
The dollar appeared on its way on Friday to end 2023 with a loss, wasting its gains over two consecutive years, influenced by market expectations that the Federal Reserve may begin easing interest rates in early next March.
The US dollar remained broadly lower on the last trading day of the year, with currency movements muted amid the holiday lull leading up to the New Year.
Since the Federal Reserve launched its aggressive rate hike cycle in early 2022, expectations about how far U.S. interest rates will rise have been a big driver of the dollar for much of the past two years.
But as economic data later pointed to signs that US inflation was cooling, investors turned their focus to when the Fed could start cutting interest rates - an outlook that gained strength after a dovish tilt at the monetary policy meeting in December.
Follow the latest news on Google News
